Trying to predict what will happen in South America’s wildest emerging markets in 2015 has the degree of difficulty of trying to compute pi to the 100th digit in your head.

With Venezuela, in particular, the range of options of what could happen next year is almost as infinite – ranging from more of the same and muddling through, to default, violence, coup, civil war and international brigades. On the economic front, whether Venezuela survives 2015 will depend almost purely on the price of oil, however. Read more

Last week, Cleary Gottlieb – the US law firm representing Argentina in its debt negotiations – held a packed closed-door session on Venezuela. The question of the day was: what if Venezuela defaults? This week, the US Senate passed a bill that seeks to sanction Venezuelan officials for alleged human rights violations. Although these two events are not obviously related — and the sanctions bill still has to be approved by Congress, and signed into law by Barack Obama — they could become so. They both also illuminate the horrible mess that Venezuela could be heading into. Read more

The bust-up between Argentina and its holdout creditors is getting uglier by the day. As the “vulture funds” do their best to prove that there is corruption at the highest levels of government, President Cristina Fernandez responded yesterday by accusing them of engaging in terrorism.

The increasingly dirty fight comes as the holdouts disdainfully reject the possibility that a deal with the private sector might materialise, so rescuing Argentina from its default situation. Aurelius Capital Management said on Wednesday that none of the offers presented by a group of Wall Street banks were even “remotely acceptable.” Read more

It may be difficult to argue convincingly that a default could be anything but bad for Argentina’s economy – the real question is just how bad – but it is less clear what it means for politics.

You might think that little could be of greater importance for leaders of a country in very serious danger of falling into default in a matter of hours than to be doing their utmost to prevent this from happening. Read more

It hasn’t been a good few days for Argentina’s government. First, a New York court ruled to block payments on its restructured debt, leaving the country teetering on the brink of its second default in 13 years. Then, in another judicial blow – this time from Buenos Aires – vice president Amado Boudou was formally charged in a corruption scandal.

Boudou heard about the decision late on Friday evening when in Cuba. The charge is the culmination of an investigation into Ciccone, a printing company rescued from bankruptcy and awarded a government contract to produce pesos. The vice president, charged alongside five other defendants, is accused of using middlemen to gain a 70 per cent stake in return for favours. Read more

Imagine an Argentina without holdouts – “it isn’t hard to do”, as John Lennon might sing. Investors are already doing so. The Buenos Aires stock market has soared 9 per cent since Cristina Fernández said last week that her country would negotiate with the holdouts, led by NML Capital. Argentine bonds have also rallied. Meanwhile, the economy has slipped into recession, partly because a shortage of foreign exchange has compressed imports.

Yet if the holdout issue was resolved, credit markets would re-open, foreign investment might soar, and currency shortages would no longer be a binding problem. Just imagine! Then the real economy would grow again, too. Read more

The US Supreme Court decision not to review the prior findings of New York courts on Argentina’s dispute with non-participants in the 2005 and 2010 debt renegotiations (the so-called holdouts) has major implications for Argentina and for those who did take part in the renegotiations. But beyond that it has a paradoxical effect: it makes the negotiation of an international bankruptcy regime inevitable. Read more

Tuesday’s event in Argentina’s fast-unfolding debt saga will be a press conference by Axel Kicillof (pictured), economy minister, at 6 pm local time in Buenos Aires. Perhaps he will add something of substance to the curiously ambiguous TV address on Monday night by Cristina Fernández, the country’s president.

Fernández pulled no punches in attacking the ‘vulture funds’ who were the winners from Monday’s ruling by the US Supreme Court. But she also left the door open for negotiation. As is often the way, the president took free rein to present herself as a promoter of a new world order, in defiance of US and UK hegemony, while the reality is a little different. Read more

Cristina Fernández, Argentina’s president, took to the airwaves soon after 9 pm local time on Monday, minutes after the USA had beaten Ghana 2-1 in the World Cup. Dressed all in white, she was in schoolmistress spirit, giving viewers a brief history of Argentina’s economic woes and the roots of its recent problems, which she put down to the military dictatorship which started with the coup d’etat of March 24, 1976. She traced those issues into the 1980s and the one-to-one dollar convertibility of the 1990s, to the 2001/2002 economic crash. She noted the change of stance initiated under her deceased husband, former president Néstor Kirchner – whom she referred to as “the president of all Argentines” – and continued under her two mandates.

She spoke for about 25 minutes (relatively little for her) and said little to clarify what Argentina’s stance now is, other than underlining that the holdouts were welcome to the same terms as those of the restructuring in 2005 and 2010 and stressing Argentina’s willingness to negotiate, while making sure to paint the “speculative” holdouts in as bad a light as possible. Read more

News on Monday that the US Supreme Court would not, after all, hear an appeal by Argentina against a lower court ruling forcing it to pay all holders of its defaulted debt came as a body blow to Beunos Aires. Investors, too, were rattled, as bond prices slumped and the country’s 5-year CDS, a form of default insurance, spiked sharply.

All eyes now are on the Casa Rosada, from which president Cristina Fernández will address the nation on television at 9 pm local time on Monday evening. Read more

José Barrionuevo, the former Barclays Capital emerging markets strategist who came up with the quantitative model that Argentina used to rationalise its punishing 2005 debt restructuring, recently wrote a guest post justifying that infamous transaction: “The framework we proposed offered a way out of default through debt sustainability, and concluded that Argentina would need roughly a 67 per cent write-off to make its outstanding debt sustainable immediately.”

The fact is that Argentina’s economy was sufficiently recovered by early 2005, largely thanks to an intervening commodity export boom, such that the government in Buenos Aires needed only a modest amount of debt-service relief from its creditors in order to regain fiscal viability. This is especially evident with the benefit of hindsight. Read more

As the US Supreme Court prepares to decide on June 12 whether or not to hear the case of the Argentine “holdouts”, the debate about the country’s debt restructuring has done little to promote understanding of the significance of the Court’s decision. It is critical to the future of debt restructuring worldwide, as an eventual ruling that allowed Argentina to pay the holdouts the same it has paid other investors would free countries in dire economic conditions and facing insurmountable debts to pursue debt sustainability, a concept that the International Monetary Fund now fully embraces and which allows for solutions that give debtor nations the opportunity to grow again. Read more

Argentina has agreed to repay its debt to the Paris Club of creditors in the latest sign of its desire to win back investors, normalise international financial relations and regain access to capital markets lost after its $100bn sovereign default 13 years ago.

The country will repay the Paris Club $9.7bn of arrears over five years, so reopening export credit mechanisms from bilateral creditors, such as the US, Germany and Japan. Argentina has also recently settled compensation claims with Repsol, the Spanish oil company; the World Bank’s arbitration unit, ICSID; and has re-instated slightly better economic statistics at the IMF’s behest. Read more

Well, perhaps, but there could still be an painfully slow ending to a trial that has dragged on for the best part of a decade, after Argentina filed a petition on Tuesday – right on deadline – seeking a US Supreme Court review of an order to pay $1.33bn to “holdout” bondholders who refused to accept restructured debt after Argentina’s 2001 debt default.

There are now three possible scenarios as to how things could go for Argentina at the Supreme Court. Read more

A timely new poll has come our way, commissioned by Graham Fisher & Company for the Emerging Markets Trade Associations, a collection of investors focused on debt. Poliarquía Consultores asked 1,000 Argentinians for their views on the economy, the problems facing the country and president Cristina Fernández de Kirchner.

The three biggest concerns for Argentines are crime, the economy and inflation and voters, the pollsters found, are unhappy with the way the government is tackling them. Read more

As Argentina’s economy enters crisis mode with the peso crumbling, nobody is watching more closely than the management of Repsol and its shareholders.

On January 29 the Repsol board will meet, as it does on the last Wednesday of every month. On the agenda will be the finer details of a proposal by the Argentinian government to compensate Repsol for having nationalised its controlling stake in Argentina’s biggest oil firm, YPF, in May 2012. Read more

Argentina has made another move toward “external financial normalisation” by meeting with the Paris Club, the informal group of creditor countries. But hold your horses. That was economy minister Axel Kicillof’s message on Tuesday evening.

Kicillof told reporters that talks had been “extremely positive”. But he was keen to clarify that all Argentina had done was “interchange positions […] on the general guidelines for a resolution proposal to creditors […] nothing more and nothing less”. In less convoluted terms: there’s still no offer on the table. Read more

There are two ways to read the IMF’s call on Monday night for Argentina to sort out its dodgy inflation and economic statistics by next March – or, uniquely, face expulsion from the international lender.

The first way is that the country will never comply. After all, railing against the IMF has been a rhetorical hallmark of the presidencies of Cristina Fernandez (pictured) and her late husband, Nestor Kirchner. Read more

Carlos Mauleon, the former Barclays Capital investment banker who handled Argentina’s 2005 debt restructuring, recently wrote a guest post on beyondbrics justifying that infamous transaction: “Whatever you may think of Argentina, … the one good decision its leaders made was to aggressively restructure [the public] debt back in 2005” because “the question is, did [Argentina] have a better choice? Not really.”

Few are willing to speak up in favour of Argentina, given a long list of questionable economic decisions made by the current government. But whatever you may think of Argentina, its leaders and its policies, you should consider that despite all of the criticism and rhetoric from the holdouts, US judges, the IMF and the IIF, the one good decision its leaders made was to aggressively restructure Argentina’s debt back in 2005.

Now even that may be thrown by the wayside if either the Supreme Court rejects hearing the case brought against them by the holdouts or accepts the case but supports the appeals court’s recent ruling. The outcome could very well turn back the clocks to December 24, 2001, a day both Argentina and 93 per cent of its creditors would rather forget; but it would also establish a poor precedent for the chances of effectively concluding any future sovereign debt restructurings. Read more

beyondbrics

forum on emerging markets

About this blog

Morning espresso

Blog guide

beyondbrics is now the beyondbrics forum, given over exclusively to our guest writers as a forum for debate on the events, opportunities and challenges of the emerging world. Meanwhile, the FT’s emerging markets team is working on a new EM service to be launched soon on FT.com. Watch this space..